Introduced in Budget 2018, the government’s plans to cap R&D tax credits raised fears that legitimate claims by startups and small business would be denied. But the proposal’s recently concluded consultation period offers a ray of hope.

Back in the more innocent days of 2018, in what could be Philip Hammond’s last Budget, the government announced a PAYE restriction on those making R&D tax credit claims.

The tax credit has become increasingly popular. R&D tax credits provided almost £3.5bn of relief in 2016/17, according to government figures. That dwarves the £350m claimed in 2010, for example.

But with this popularity has come a concomitant abuse of the regime, the government argued. HMRC identified £300m in frauds claimed by “artificial corporate structures”. To deter abuse, the government proposed a cap.

From April 2020, the amount that a loss-making company can receive in R&D tax credits will be capped at three times its total Pay As You Earn (PAYE) and National Insurance contributions (NICs) liability.